AT&T and the Telecom Family

It’s official. After a week or so of speculation, SBC Communications announced that it is buying AT&T. The deal that Clinton FCC Chairman Reed Hundt once called “unthinkable” is now–pending regulatory approval–a reality.

The acquisition is a bit of a family reunion–SBC is, after all, one of the “baby bells” spun off by AT&T twenty years ago. A “Mother and Child” reunion, according to a Philadelphia Inquirer story last week. But does the deal signal a return to the old days of Ma Bell? Is the old Bell system family being revived?

Critics will no doubt suggest that–but the reality is far different. The Bell System monopoly that dominated telephone service for most of the 20th century is gone forever. In telecommunications, as elsewhere, you can’t go home again.

The fact is that AT&T is a shadow of its former self. Rather than a returning matriarch, Ma Bell is a frail, aging parent who no longer can take care of herself, and is moving in with her offspring.

AT&T’s deterioration has been steady and remarkable: from over 300,000 employees in 1994, she has only 47,000 today. She no longer dominates long-distance calling: she only has a fraction of that market, which is itself disappearing. Her wireless and cable operations are gone. She still has some assets–including a brand name–that SBC may find helpful, but could end up a burden on her child.

In any case, the old telecom familyis too far-flung and contentious ever to again get back together. The other Bell children, Verizon, BellSouth and Quest, all have their own interests. And they too may have passed their heyday. Much of their time is spent competing for attention (and subscriber lines) with their cousins from the cable TV branch of the family.

The biggest headaches, however, are coming from a younger generation of firms–providing wireless service. Many of this new generation have kept their ties to their Bell parents, but not all. In any case, the wireless generation is too numerous and energetic to even consider a family reunion. And some even younger members of the family–providing Internet telephony and other digital services–are too rebellious to even think about family ties.

AT&T’s acquisition is a landmark moment for the telecom family. But rather than a time for worry that it is heading for the old materalistic ways of the past, its a time for reflection on how much the family has changed for the better.

The trends leading to today’s deal have been good for consumers and good for the economy. Today’s telecommunications industry is increasingly competitive and diverse. Far from threatening those trends, SBC’s acquisition of AT&T merely underscores them. It should be approved by regulators without delay.

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James Gattuso / James Gattuso is a Senior Research Fellow in Regulatory Policy in the Roe Institute for Economic Policy Studies at The Heritage Foundation. Gattuso also leads the Enterprise and Free Markets Initiative at Heritage, with responsiblity for a range of regulatory and market issues. Prior to joining Heritage, he served as Vice President for Policy at the Competitive Enterprise Institute and also as Vice President for Policy Development with Citizens for a Sound Economy (CSE). From 1990 to 1993, he was Deputy Chief of the Office of Plans and Policy at the Federal Communications Commission. From May 1991 to June 1992, he was detailed from the FCC to the office of Vice President Dan Quayle, where he served as Associate Director of the President's Council on Competitiveness. He lives in Alexandria, Virginia with his wife Dana, 8 year-old son, Peter (whom he relies upon to operate his VCR), and his four year-old daughter Lindsey (who does the DVD player.) He has no known hobbies, but is not nearly as boring as he seems.